Key Person Insurance Explained

Key Person Insurance Explained

Key person insurance is a type of life insurance policy that safeguards businesses against financial devastation in the event of the death of an individual who is vital to the company’s success. Separate key person insurance policies are purchased for each key employee. This type of policy can also include disability coverage of the key person.

A key person can be an individual who:

  • Has a highly specialized role or unique set of crucial skills
  • Brings in a significant amount of sales
  • Makes imperative business decisions

Qualifications to be considered a key person:

  • Is critical to the livelihood of the business and actively works fulltime
  • Is not a government or seasonal employee

Who owns the key person insurance policy?

The company owns the policy, making them the beneficiary if the key person dies prematurely. This policy can also be used to buy out the key person’s shares or be gifted as a retirement benefit to the insured.

Advantages of key person insurance:

  • Policy is easily implemented and requires minimal maintenance
  • The use of funds is flexible
  • Life insurance benefits are paid to the company tax-free
  • Show clients, creditors, lenders, and stockholders that a solid continuity plan is in place for the business

How much does key person insurance cost?

Cost varies depending on business size, industry, and key person’s medical history and role in the company.


Connect with a member of our Commercial Risk team to learn about your options. 


This material has been prepared for informational purposes only. BRP Group, Inc. and its affiliates, do not provide tax, legal or accounting advice. Please consult with your own tax, legal or accounting professionals before engaging in any transaction.

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